Five Critical PPC Budgeting Problems

Pay per click budgeting is not a topic I thought you could devote a whole blog post to, when I first started doing PPC in 2004. But I was wrong.

Here are the five most important budget-related topics in pay per click advertising:

Insufficient spend

Overspending

Effects of tests on spend

Seasonal changes

Optimizing ROI via budget allocation

Let’s examine each in detail:

1. Insufficient Spend: “I Can’t Spend The Budget!”

Some companies do not budget their PPC advertising spend. But many set specific monthly budgets. Sometimes a part of the annual spend is left back to assign to various months later, as more is revealed about the account’s performance and other business factors.

You may budget more granularly. For example, you might create separate campaigns geotargeted to different areas, assigning different portions of the overall budget to each. Or you might promote several product lines that get different percentages of the PPC budget.

I’ve learned in agency work that clients really want to spend the dollars they allocated to a particular advertising channel. Depending on your client’s savvy and your success educating them, they may not understand why PPC spend doesn’t work exactly like a media buy. So you have to educate them AND do your best to spend the budget.

Prepare the client before the PPC begins that you will bring them results and feedback on the initial budget, and then you’ll need to sit down again and reassess the budget segments. You’ll have a much better idea of how much can be spent on what after the ads run for a month or two and you have a chance to optimize a little bit.

Under spending account-wide isn’t much fun either because then the accountants get involved. PPC can give accountants headache, because so much in it varies. You may have to roll unspent funds over to the next month, and this can lead to confusion. Try to avoid that by spending the whole budget each month.

Here are three of the main causes of under spending:

Not enough keywords from the niche

Low click-through rate

Not enough clicks in the niche to reach the target spend

You only find out there aren’t enough clicks in a niche by first trying all the relevant keywords you can find and doing several rounds of ad testing. Make sure you haven’t overly limited your audience by starting only with exact match. I usually start with all three match types and then, if the budget is reached, I start hacking away and adding negative keywords to optimize. It’s less fun to start too targeted and not get enough clicks to see if your ads are any good.

If you’ve done all that and CTR is at least between 2-5% (search network; in content at least 0.1-0.3%), then you’ve probably hit that niche’s max click inventory, and you may need to lower its target spend.

Incidentally, under spending is the only time I ever use the Google Campaign Optimizer, since its main purpose in life seems to be to make more Google money by finding you more clicks, no matter how they perform from an ROI perspective. Make sure to go back and cut the ones that don’t work.

Also, be careful not to show your ads to the wrong searchers, because they’re participating in your ad tests, and this could diminish the validity of those results.

2. Overspending: “Oops, We Spent Too Much This Month”

Most importantly, don’t spend more than the client asked you to. There are a number of ways to do this, and my favorite way is using Google Invoicing and monthly budgets in the My Client Center. But if you don’t have invoicing, set up your clients pre-pay and only charge their cards monthly for the target monthly spend.

3. Effects of Tests on Spend: “The Spend Is All Over The Place!”

As discussed in my last SEJ article about PPC testing, all tests change performance. Changes to keyword lists and new ads can change the number of clicks you get per day or per month. If CTR increases, you may hit your target spend sooner than you did before. If CTR decreases, you may not spend the entire budget.

Because so much of this can change during a month, it’s a good idea to get some guidelines from the client ahead of time so you can make changes to daily budgets, or adjust the budget segments yourself without contacting the client every time. It’s key to understand the client’s goals and priorities.

For example, we started a PPC effort to advertise a local car rental company. At the beginning, they wanted to market minivans to guys on golf trips. We found that the minivan niche was small, the website’s landing pages for minivans weren’t optimal and we couldn’t change that just then, and the ROI on cars was much better. We discussed this with them and found that, really, they just wanted a good ROI from their PPC. They ok’d this change in emphasis, and the account has produced an average of about 900% ROI.

4. Seasonal changes: “How Come We’re Not Spending Much This Month?”

Many businesses deal with seasonal variations in activity- e.g. most ecommerce sites budget differently for the holidays. And tourist destinations can have significant off-seasons where business all but dries up.

For this reason, annual budgets should be flighted – which means allocating different amounts to different months. In businesses with a large degree of seasonal variation, especially if conversion analytics have not been in place for a year already, expect that the first year will teach you a lot.

Remember to do a review of seasonal variations in searches, CTR, and CR before solidifying the next year’s budget. This won’t be perfect, because you likely are learning a lot about the market and what ads work and so on in the first few months- so even the first Y-Y comparison could be better, but of course it’s better than nothing! You can at least look at the seasonal variation in searches and compare that to Google Trends on signal keywords to create a second year budget much more optimal than the first year budget.

This one is awesome and requires some explaining, so I’m going to write a completely separate blog post on it later.

But the basics are: find out which campaigns perform the best, which perform the worst, and which are in the middle. Then allocate more of your spend to the better ROI campaigns. Make sure to keep enough in the worst campaigns to keep testing and improving them. If you can’t afford that, you should pause them. More detail on this in my next column.

Have fun budgeting optimally!

Brian Carter is the Director of Search Engine Marketing for Fuel Interactive, an interactive marketing agency in Myrtle Beach, South Carolina. He is responsible for the SEO, PPC, SMM, and ORM programs at Fuel and its partner traditional agency Brandon Advertising & PR.